Bonus Season: A guide to safeguarding your bonus on divorce.

You've worked hard to build your career and establish a strong financial future for yourself and your family. If you get divorced, it's important to understand how your assets, including your bonus, will be divided.

The division of assets on divorce is based on several factors, including the length of the marriage, the resources (individual and joint), and the financial needs of each spouse and any dependent children of the family. When it comes to your bonus, the court will consider whether it is "matrimonial property" or "non-matrimonial property". 

Matrimonial property is defined as property acquired during the marriage, including income earned during that time. If your bonus is considered matrimonial property, it will be subject to division as part of the overall asset split in the divorce and potentially shared. 

Non-matrimonial property on the other hand, includes property acquired before the marriage or via inheritance or gift. If your bonus is considered non-matrimonial property, it will not be shared, but may be part of a maintenance claim.

Recent case law provides clarification that bonuses should only be characterised as non-matrimonial where they relate to a period commencing at least 12 months after separation. So any bonuses that are earned during the marriage or 12 months after, are likely to be considered “matrimonial property” and therefore shared upon divorce.

The curve ball here is that the courts have wide discretion when it comes to the division of assets on divorce, and there is no hard and fast rule when dealing with bonuses. In some cases, the court may decide to divide a bonus even if it is considered non-matrimonial property if the needs of the parties can only be fairly met by including the bonus in the matrimonial pot available for division. That is likely to be limited to meeting income needs. In such cases, a bonus received post-separation is likely to remain on the table but the claim will likely be much lower in value. 

It is worth noting that discretionary bonuses, which are not guaranteed and are subject to certain conditions, may be treated differently than guaranteed bonuses. The court will consider the likelihood of receiving a discretionary bonus when determining the value of the bonus for the purpose of the divorce settlement. 

To safeguard your assets and minimise any potential claim in the event of a divorce, it's important to seek legal advice early on and consider entering into a prenuptial or postnuptial agreement. These agreements can provide clarity and certainty around the division of assets, including your bonus, in the event of a divorce. Another option is to consider placing your bonus in a trust, which may help to shield it from division during a divorce, particularly if the funds have been placed in trust to cover future expenses such as school and university fees for children of the family. 

While the treatment of bonuses in divorce can be complex and depends on several factors, including whether it is considered matrimonial or non-matrimonial property, seeking legal advice and taking steps to protect your assets can help ensure a fair outcome in the event of a divorce. By being proactive and informed, you can help to ensure that your hard-earned bonuses are preserved for your future.

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